David Visconti

In the current market, sellers who need to sell, will often agree to a buyer credit, which allows the buyer to pay the cost to reduce their interest and thus reduce their monthly payment.

Let Me Explain.

A mortgage loan buydown is a financing strategy that allows borrowers to reduce their initial interest rate and monthly mortgage payments. It typically involves paying extra upfront fees to a lender, which are used to “buy down” or lower the interest rate on the loan for a specified period, often the first few years. There are two common types:

1. Temporary Buydown: In this approach, the borrower pays an upfront lump sum to the lender, who then subsidizes the interest rate for an agreed-upon period, like 1, 2, or 3 years. This results in lower initial monthly payments, making homeownership more affordable at the outset.
2. Permanent Buydown: Here, the borrower pays points or fees upfront to permanently reduce the interest rate over the life of the loan. This can lead to long-term savings on interest payments.

In both cases, the borrower enjoys lower initial costs, but it’s essential to weigh the upfront expenses against the long-term benefits to determine if a mortgage buydown is a financially prudent choice.